Film Investment Strategy

Portfolio theory suggests that diversification across asset classes
is an attractive way of taking some limited
incremental risk for an overall higher return.

If you’re wealthy, you’ll have much of your portfolio in government
bonds, quite a lot in corporate
bonds, a little less in property, something less again in equity, a very little
in derivatives, and a tiny amount in uncorrelated high-risk investments.

The cash in the bank is
earning interest—unless it’s in a Swiss
bank, in which case you’re paying them
to keep it safe. Such are our
times. You have a minimum cushion there
to cover your obligations, but you want to keep moving it up the scale of risk to
increase your return, and your joy. Ah,
life!

Your government bonds may
be the fruit of your futures
investments, but we’ll get there in a minute.

Investment-grade corporate
bonds of course are issued by large companies. From property
you have income in rents. Your equity is committed to shares in
companies, and possibly film investments; the cash is no longer in the bank: it
is irretrievable, and therefore high-risk.

Past this point on the chart, everything can go to zero.

Derivatives include options and futures. A government
bond can have a future; i.e.,
you can bet on the price of the bond down the line without owning it; but if
you hold a future you are obliged to
buy that bond at a certain point in
the future. If you hold an option you have the right, but not the
obligation, to buy or sell at that price.

Finally, we come to uncorrelated
high-risk investments. Let us call
them “derivatives plus.” Typically they mean films and musicals. They are uncorrelated
because, if the economy fails, the safer investments can tank, but films and
musicals can be hits even in a depression.
They are high-risk because
they usually go zero.

Why on earth should you put money in a film? Because the incremental risk (the extra
risk, on top of what you already have), in the context of the total portfolio,
is minimal. And you give yourself the opportunity to meaningfully increase the
portfolio return. The joy.

All of these elements can be probability-weighted. You could argue that the expected return in
film investment should be viewed as zero.
But this fails to take into account that tail-end events can and do
happen, with a frequency that cannot be correctly estimated.

If your portfolio includes 20% in equity, and 5% in option-like
investments, then it can include all sorts of derivatives, as well as venture-capital funding, and investments in
films and musicals.

Now, if you’re still with me, I’d like to propose something that
will weigh lightly on your portfolio, and can give it joy:

I’m making a film for the looooooow
budget of one hundred thousand euros, aka
one hundred and thirty thousand dollars.
And I’m selling twenty shares in that budget for five thousand euros /
six thousand five hundred dollars each.

Why on earth should you put five thousand euros in a film? Well, you already know.

How can I do it so cheaply? We’re
making it in Greece, where costs are low, technicians are out of work, and actors
(like actors everywhere) are ambitious enough to defer their fees (which will
afterwards come out of my profit, not
yours).

How can I promise you joy?
It’s a romantic thriller we’re making—the most popular, the most
saleable, the most profitable genre in the world. And the story is compelling, something
we’ll all be proud to be associated with.

With a budget of that size the risk is rock-bottom—and if you’re new
to film investment, it’s not a bad place to start!

A business plan, a slide show on the project with details on
everyone involved, and of course the script, are available on request. There's a brief overview here, and
there are some details about me here.